The Energy ProblemSouth Africa's Debate on Electricity Policies

WORDS Sara Sekine

South Africa, the second biggest economy on the African continent, is now struggling to meet the electricity demand. Eskom, the state-owned utility which supplies 95% of the country’s electricity, is having problems with its coal-fired plants due to a lack of maintenance and delays in new power plant constructions. Medupi and Kusile power plants were expected to be ready to provide electricity by 2013 and mid-2014 respectively, but are in fact years behind schedule.

In November 2014, Eskom started to implement ‘loadshedding’ or rolling blackouts for the first time since 2008. President Zuma in his speech at the African National Congress’ (ANC) 103rd anniversary celebrations in Cape Town said: ‘We don’t feel guilty about the energy issue. It is not our problem of today, but a historic problem, one of apartheid, that we are resolving.’ Many dismissed his argument as irrelevant and not productive, some criticising his argument as ‘revisionism’ as he blames the current electricity issues on the past. More unsettling it seems is that debate around economic policy, including the electricity problem, is developing into a blame game. But what is the history of the electrification programme, and what alternative options are available to cope with the power cuts instead of blaming the past?

Democratisation & the national electrification programme

This bank has to shut down when loadshedding hits. Not many stores can afford to buy their own generator so while power is out, businesses are at a loss. Photo: Melike Sevim

Even though apartheid ended in 1994, establishing equality in the lives of South Africans was no easy task. Many lives are still marked by inequality, from jobs to housing, but among these inequalities, the proliferation rate of electricity was a salient issue. The Census conducted in 1996, the first national census that covered the whole population of South Africa, showed only one in four non-urban black households had access to electricity, while the rate for non-urban white households was 97%. It is also worth noting that Eskom even had a 55% reserve margin in the 1990s due to overbuilding in the 1980s. But the demand for electricity was low because vast parts of the population were denied access to electricity. Since impoverished black communities were excluded from society, the electrification of low-income households was neglected in the 1980s, but was quickly put back on track as the country experienced the drastic transition of democratisation following the start of the negotiation process in 1990. While campaigns of other political parties placed weight on the extirpation of crime or the perseverance of traditional powers, the previously-banned ANC proposed a national electrification plan in its manifesto for the 1994 national election. The idea of a national electrification plan was envisaged in the Freedom Charter which called for the provisions of basic services for all.

In 1992, the ANC fashioned an agreement with Eskom to electrify 2.5 million houses from 1994 to 1999 making Eskom the central role player in the electrification programme. In 1994 the party launched the Reconstruction and Development Programme (RDP) and pledged ‘electricity for all’ with the target of doubling the penetration rate of electricity to 72% by 2000. Eskom also played an important role in financing the electrification programme from 1991–2001 until the government started funding the capital cost and paying subsidies for national electrification. For poor households, Free Basic Electricity (FBE) was introduced in 2004 allowing them to receive 50kWh of free power per month with a minimal or no fee charged for installation. In the end, all the policies implemented since 1990 contributed to the increase of the proliferation rate, from 35% of households in 1990 to 84% in 2011 (StatsSA 2012).

Who is to blame?

In the 1980s and 1990s, the problem was more to do with distribution of electricity than the shortage of power, but it shifted to the latter in 2008 when Eskom first started loadshedding. But is the President correct to blame the current energy crisis on the past?

Chris Haw, managing director of SOLA Future Energy, and also co-founder of the South African PV Industry Association (SAPVIA), dismissed President Zuma’s blame on apartheid, saying that the ANC failed to respond to industry’s call to maintain existing power plants and invest in new power plants. He points out that during the apartheid era South Africa had an excess of electricity, but the ANC-led government failed to act decisively between1994 and 2004 which led to belated decisions on new power plants. ‘The delayed decision to proceed and the poor management of the Medupi and Kusile Projects that have rendered them four years late, occurred not under the apartheid regime but under ANC government,’ says Haw. Furthermore, President Zuma’s predecessor, former President Thabo Mbeki, acknowledged that the government ignored pleas from industry to invest in new power plants to keep up with the growth of South Africa’s economy saying: ‘Eskom was right and government was wrong.’

President Jacob Zuma visits Medupi Power Station in Lephlale (8 June 2012). Medupi will be the fourth largest coal-fired station in the southern hemisphere but the delay in its construction is costing Eskom and the country millions of rands. Photo: GovernmentZA/flickr

Liz McDaid, founder of the Green Connection and member of the Southern African Faith Communities’ Environment Institute, also refutes the president’s statement and blames the outdated Integrated Energy Plan (IEP) for the current electricity problem. The IEP was envisaged in the White Paper on Energy Policy of 1998 to provide a roadmap of energy policy which included more diverse and green energy initiatives as its objective. ‘Why they stick to coal-fired plants instead of investing more in renewable energy is a political question and we do not know the answer,’ says McDaid. But there is the much-debated question of the links between Chancellor House, known as the fundraising arm of ANC, and the ruling party on the part of Medupi and Kusile power plants investment plan. She also casts a critical eye on the government’s decision to invest in a new nuclear power plant, suggesting again that it is more of a political decision and advises people to think carefully how much generating capacity the country really needs.

The national electricity demand has been lower for the last few years than expected in the Integrated Resource Plan (IRP) 2010–2030. This is due to, amongst others, Eskom’s buyback programme which incentivised certain industrial consumers to reduce their demand in 2011 and 2012, and the electricity price increases in recent years. The IRP was written in 2011 with the aim of doubling generating capacity following the start of loadshedding in 2008, which President Zuma referred to as the basis for the new nuclear investment.

Eskom in dire financial situation

According to Haw, ‘Eskom has been keeping the lights on by running expensive diesel fuelled open cycle gas peaking turbines for 12 hours a day. These plants are meant to be run two to three hours a day, only at peak times in the year. This severely affected Eskom’s finances.’ Haw expresses the current energy situation as a challenge to find a balance between Eskom and private power generation companies. He points out that Eskom has lost a lot of experienced employees in the last few years who sought out opportunities with Independent Power Producers (IPPs), or were frustrated with the company’s management system. The parastatal responded by raising salaries to keep staff, making it more inefficient. In his view, the way forward for Eskom is to focus on ‘systems operation’ which manages demand and supply of electricity in order to secure the national power grid and avoid interruptions of supply. Haw asserts that the generation of energy should be left to the private market, and the distribution to the government so that there is no conflict of interest about who can use the wires to deliver the product.

‘Eskom has been keeping the lights on by running expensive diesel fuelled open cycle gas peaking turbines for 12 hours a day. These plants are meant to be run two to three hours a day, only at peak times in the year. This severely affected Eskom’s finances.’ – Chris Haw, managing director of SOLA Future Energy

Haw also warns that even if the new plants Medupi and Kusile come online, it will not solve the underlying issue of maintenance. ‘During January 2015 we had almost half of the installed capacity under maintenance, and a large part of it is caused by unplanned maintenance. So even if Eskom completes the new plants there is a high chance that problems may arise in other plants. All the plants are very old,’ explains Haw.

Khulu Phasiwe, spokesperson for Eskom, explains the underlining reason for the current loadshedding as a lack of new generating capacity. He claims that the four new power stations under construction, namely; Medupi, Kusile, Ingula, Sere and the concentrating solar project will bring stability to the power grid. He also stresses that summer is generally a plant maintenance season for Eskom which allows for more generating units in winter – a high demand season. The parastatal expects the power system to remain vulnerable for the next two to three years, but is assured that the first units of Medupi and Kusile will be operational this winter and the end of 2016 respectively. This will add substantial capacity to the grid. Both Medupi and Kusile power stations are expected to be completed by the 2019/2020 financial year.

Why not renewable energy?

Why doesn’t South Africa take advantage of its renewable energy sources like solar or wind? Surprisingly, last year the contribution of renewable power (solar and wind) to the country’s energy capacity was only 1%. In fact, the country heavily relies on coal fuels which provide almost 90% of the energy capacity, leaving only 5% to nuclear power and 5% to hydroelectric and pumped storage schemes. This unbalanced energy mix has become detrimental to South Africa’s electricity supply as Eskom’s power plants are aging and have to be stopped for maintenance while it is running expensive diesel power as a temporary solution.

There are a number of reasons why the shift from coal fuels to renewable energy has been slow. Haw explains the main impediment has been the price. ‘The cost of renewable energy was much higher than that of coal fuels. It is not a level playing field for renewable power producers because tariffs are not cost reflective and Eskom keeps cheaper prices by asking the government to inject money in the form of equity instead of raising tariffs,’ explains Haw. McDaid offers another perspective on the price. ‘The reason why electricity was so cheap is because the human cost from air pollution and coal mining was never included in the price. If these costs were taken into account properly, people would know renewable energy is always a better source of energy.’

Haw asserts that the price impediment has totally changed because the cost competitiveness has reversed in the last three to four years making energy from new renewable power plants cheaper than that from new coal power plants. Haw says the gap is likely to continue to widen because the cost of coal fuels, driven by inflation tends to escalate, whereas the cost for solar power keeps dropping, as sunlight stays free while skills to build solar plants keep improving and making them more cost-effective. In Haw’s view, the next challenge is to educate all our citizens about the role of renewable power within our energy mix and to change their mind-set. ‘The government still doesn’t see solar power as a proper contribution to the national energy mix because they think it’s unstable and unreliable.’ However, experiences in South Africa and around the world show that the weather follows certain patterns and it is feasible to predict the weather in a day or two in advance to plan suitable electricity production. ‘Government initiatives like the REIPPP programme have started to open up the electricity market for renewable power projects, and at least now we have private entities alternative to Eskom. Unfortunately, most other aspects of the industry are in deterioration e.g. distribution infrastructure and tariffs which have been going up,’ he explains.

The South African energy system is still coal-driven. Last year, the contribution of renewable powers to the electricity productions was only about 1%. Photo: Adrian van Leen/rgbstock.com

Another issue to consider is the fact that municipalities get a large part of their revenue from selling electricity through the grid. McDaid agrees that municipalities’ dependence on electricity sales is one of the stumbling blocks but also believes that the dependency is exaggerated and that they should have enough revenue from treasury and other sources. There has however been an improvement. In June 2014, the City of Cape Town established the first agreement with a SOLA Future Energy project to buy electricity produced by the Black River Park Solar Project for a period of 20 years. ‘It took us a very long time to reach an agreement with them. But it is working well and other municipalities are likely to follow the footsteps of Cape Town,’ says Haw.

Of course, there are various arguments about the choice of power sources. Some think renewable power is not an option because it tends to be expensive and unstable, compared to coal fuels which can provide relatively cheap and stable electricity. But what seems clear is the current output from renewable energy, 11GWh, is far less than what the government promised to achieve, 520GWh, when it received US$3.75 billion loan from the World Bank for building Medupi.

How are people coping with the power shortage?

Economists and business sectors are aware of the impact power shortages will have on the country’s already stagnant economy, which only grew 1.4% in the third quarter of 2014. It has been acknowledged that economic growth depends on the success of the government’s investment plan to augment generating capacity. While it will be a while until we see the impact on the country’s economic indexes, local businesses and people are seeing and feeling the impact in their bones.

Why doesn’t South Africa take advantage of its renewable energy sources like solar and wind? Surprisingly, last year the contribution of renewable power (solar and wind) to the country’s energy capacity was only 1%.

‘I am concerned with the impact on our business because the bank has to close offices including ATMs outside,’ says Nowawie Adams, manager of Capitec Bank in Wynberg. Many small stores do not have their own generators so they have to either shut down or keep businesses open in the dark and use a memo pad and calculator to do the bills. ‘We check the loadshedding schedule so that we can prepare food in advance to sell while the power is out,’ says Zainoenisa Miller, manager of a fast-food chain. ‘I could still meet my target because loadshedding occurred in the morning when business is not usually busy,’ she says. Stores that sell fresh products, such as butchers and supermarkets usually have their own generators but that doesn’t mean their businesses are unaffected. The local supermarket chain Shoprite has its own generator which switches on automatically when the power is out. ‘We run business as usual, but we do have concerns about the impact because running a diesel generator is very expensive, not just diesel itself but we need to pay for a guy to come to fill up the tank up. We are lucky because we can afford to have a generator while other smaller shops can’t and suffer from the loadshedding,’ says Nabeal Bardien, manager of Shoprite in Wynberg. McDaid points out that taxpayers are suffering from double costs because they have to buy generators and expensive diesel to keep their businesses afloat.

Meanwhile, President Zuma in his 2015 State of Nation Address said government’s priority is to inject R23 billion into Eskom to support its financial situation, a ‘bailout’ in other words. He places the electricity crisis first on his agenda but hints that the nuclear build programme would be a replacement for Eskom’s old plants.

Obviously, South Africa is coming to a crucial turning point in its electricity system. There are many perspectives to be considered and there will not be an easy answer that works for everyone. It is of utmost importance that the people of South Africa keep speaking up about the issues and take advantage of the hard-earned democracy to steer the nation onto the right path.

Sara worked in a trading company in Tokyo for three years before coming to Cape Town to pursue her real interests: journalism and human rights. She enjoyed working as a journalist in the Rainbow Nation, surrounded by great people with a big heart.